The number of failed land auctions has doubled to 796 from January-July 2018.
China is facing yet another drag to its economic growth outlook as the softening property market adds to its list of growing woes, according to Fitch Solutions.
The real estate fixed asset investment (FAI) growth is set to weaken, following its 9.9% YoY growth from January to September. Property investment growth also slowed for the second consecutive month to 8.9% in September from 13.2% in July. Nationwide property sales volume fell by 3.6% YoY in September.
“Declining property FAI growth is likely to add another layer of pressure to the Chinese economy amidst an increasingly challenging external environment brought about by an escalation in US-China trade tensions, informing our forecast for real GDP growth to weaken to 6.4% in 2019, from 6.7% in 2018,” Fitch Solutions said in a report.
Additionally, sales growth in Tier 3 and 4 cities also slipped by 0.7% YoY last September from 3.9% YoY in August.
Failed land auctions are also expected to extend over the coming months as numbers has doubled to 796 in the first seven months of 2018 from last year. The 100-cities land auction price growth also softened to 14.8% YoY in September from 36.1% YoY in October 2017.
“Given that the fiscal revenues of Chinese local governments are heavily reliant on the value of land sales, weakness in the property market would likely to constrain their ability to significantly boost infrastructure spending, without a corresponding increase in government debt,” Fitch warns.
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